Tuesday, September 10, 2019

Why Judge in CVS Deal for Aetna Slammed Justice Department


By Robert Teitelman Sept. 10, 2019 9:24 am ET
The end was anticlimactic.
For months, U.S. District Judge Richard Leon had sowed uncertainty over the $70 billion CVS Health acquisition of Aetna while he pursued a review known as a Tunney Act hearing, examining whether the consent decree CVS signed with the Justice Department’s antitrust division was in the public interest. CVS had closed the deal with Aetna in November 2018.
Most Tunney Act cases are pro forma. Not this one. In April, Leon announced he would hold a hearing in June, which would include opponents of the deal, stirring protests from the government and fears in the CVS camp that he would try to kill or alter the deal, and on Wall Street that he would undermine a consent-decree process that eases the approval of many M&A deals.
Much of this turned out to be overblown. Instead, Leon briskly approved the deal in a memorandum opinion released last Wednesday, arguing that critics, like the American Medical Association, had not succeeded in showing that the transaction would harm the public interest. Shares of CVS (ticker: CVS) popped about 1% on the news.
So what was this fuss about? The judge’s 22-page opinion argues that the Justice Department had failed to make an adequate case for the consent decree, in which CVS sold Aetna’s Part D Medicare assets to WellCare Health Plans . Leon had earlier complained that the decree involved “less than one-tenth of 1% of the merger” and that the government was rushing the consent decree. (A few months before, Leon had tangled with the Justice Department over the AT&T [T] merger with Time Warner. Leon rejected the government’s case against AT&T. The Justice Department then appealed—and lost.)
“If the Tunney Act is to mean anything, it surely must mean that no court should rubber-stamp a consent decree...” Leon wrote. The 1974 Tunney Act mandates that the public has 60 days to comment on a proposed consent decree, after which the government must publicly provide a final response. In the opinion, Leon was withering on the Justice Department’s response, which, he writes, “Left much to be desired. It is rife with conclusionary assertions that merely reiterate the government confidence in the proposed remedy, but shed little light on the reasons for that confidence.” The government’s “perfunctory response” was “particularly disappointing in light of the volume and quality of the comments to which it was responding.”
That helps explain Leon’s unusual decision to delay approval to hold the hearing, with testimony from both opponents and proponents of the deal. He insists that the hearing was designed to assist him in evaluating the public record, and that he wasn’t relitigating the entire deal. Tunney Act hearings are not trials, making it easy for Leon, who alone could ask follow-up questions, to turn down a Justice Department request to cross-examine witnesses.

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